REE 3043 Quiz 4 UPDATED ACTUAL
Exam Questions and CORRECT Answers
B. Land Development Loans - CORRECT ANSWER - Different financing requirements
usually are involved in the various phases of a property's life. Which of the following types of
loans is used to finance improvements to the land, such as sewers, streets and utilities?
C. Bullet Loan - CORRECT ANSWER - An interest-only balloon mortgage loan is
commonly referred to as a(n):
D. Loan Commitment - CORRECT ANSWER - Which of the following terms refers to a
written agreement that binds the lender to make a loan to the borrower provided the borrower
satisfies the terms and conditions of the agreement?
A. Similar to Home Loans, the legal borrower in a Commercial loan is often a single asset
corporation - CORRECT ANSWER - When comparing Commercial Loans versus Home
Loans, which of the following statements is least correct?
C. Yield-maintenance - CORRECT ANSWER - If mortgage rates decline significantly,
borrowers may decide to prepay the principal on their loan even if they face prepayment
penalties. One way that lenders protect themselves from prepayments in such circumstances is to
require the borrower to pay the lender the present value (PV) of losses due to prepayment. This
process is referred to as:
C. Default risk - CORRECT ANSWER - While floating rate mortgage loans may offer
lower interest rates to borrowers than comparable fixed-payment mortgages, floating-rate loans
may increase a lender's exposure to which of the following risks since borrowers may not be able
to continue to service the debt if payments on the loan increase significantly?
C. Similar to LPs (Limited Partnerships), LLCs (Limited Liability Companies) permit only the
general partner to participate in management - CORRECT ANSWER - Which of the
following statements is least correct?
, D. Interest rate risk - CORRECT ANSWER - A commercial mortgage lender can reduce
their _______________________ by issuing floating (adjustable) rate mortgages.
B. U.S. Owner-occupied housing totaled about $26 Trillion, about 4 times the total value of all
U.S. Commercial Real Estate. - CORRECT ANSWER - Which of the following statements
regarding U.S. commercial real estate equity and debt ownership and other U.S. assets, as of
2011, is least correct?
C. Taxpayers cannot exchange an interest in real property for a Tenancy in Common (TIC)
investment - CORRECT ANSWER - Which of the following statements is not correct?
A. Construction loans - CORRECT ANSWER - Which type of loan is NOT suitable for
long-term commercial financing?
D. Owners transferring LP interests into an "operating partnership" (OP) receive units in the OP,
thus triggering a taxable sale. - CORRECT ANSWER - Which of the following statements
regarding UPREITs and related REIT structures is least correct?
B. 0.77 - CORRECT ANSWER - Given the following information, calculate the loan-to-
value ratio of this commercial loan:
Estimated net operating income in first year:
$150,000
Debt service in first year:
$100,000
Loan amount:
$1,000,000
Purchase price:
$1,300,000
Exam Questions and CORRECT Answers
B. Land Development Loans - CORRECT ANSWER - Different financing requirements
usually are involved in the various phases of a property's life. Which of the following types of
loans is used to finance improvements to the land, such as sewers, streets and utilities?
C. Bullet Loan - CORRECT ANSWER - An interest-only balloon mortgage loan is
commonly referred to as a(n):
D. Loan Commitment - CORRECT ANSWER - Which of the following terms refers to a
written agreement that binds the lender to make a loan to the borrower provided the borrower
satisfies the terms and conditions of the agreement?
A. Similar to Home Loans, the legal borrower in a Commercial loan is often a single asset
corporation - CORRECT ANSWER - When comparing Commercial Loans versus Home
Loans, which of the following statements is least correct?
C. Yield-maintenance - CORRECT ANSWER - If mortgage rates decline significantly,
borrowers may decide to prepay the principal on their loan even if they face prepayment
penalties. One way that lenders protect themselves from prepayments in such circumstances is to
require the borrower to pay the lender the present value (PV) of losses due to prepayment. This
process is referred to as:
C. Default risk - CORRECT ANSWER - While floating rate mortgage loans may offer
lower interest rates to borrowers than comparable fixed-payment mortgages, floating-rate loans
may increase a lender's exposure to which of the following risks since borrowers may not be able
to continue to service the debt if payments on the loan increase significantly?
C. Similar to LPs (Limited Partnerships), LLCs (Limited Liability Companies) permit only the
general partner to participate in management - CORRECT ANSWER - Which of the
following statements is least correct?
, D. Interest rate risk - CORRECT ANSWER - A commercial mortgage lender can reduce
their _______________________ by issuing floating (adjustable) rate mortgages.
B. U.S. Owner-occupied housing totaled about $26 Trillion, about 4 times the total value of all
U.S. Commercial Real Estate. - CORRECT ANSWER - Which of the following statements
regarding U.S. commercial real estate equity and debt ownership and other U.S. assets, as of
2011, is least correct?
C. Taxpayers cannot exchange an interest in real property for a Tenancy in Common (TIC)
investment - CORRECT ANSWER - Which of the following statements is not correct?
A. Construction loans - CORRECT ANSWER - Which type of loan is NOT suitable for
long-term commercial financing?
D. Owners transferring LP interests into an "operating partnership" (OP) receive units in the OP,
thus triggering a taxable sale. - CORRECT ANSWER - Which of the following statements
regarding UPREITs and related REIT structures is least correct?
B. 0.77 - CORRECT ANSWER - Given the following information, calculate the loan-to-
value ratio of this commercial loan:
Estimated net operating income in first year:
$150,000
Debt service in first year:
$100,000
Loan amount:
$1,000,000
Purchase price:
$1,300,000
